If speed of adoption and scale of use were top considerations in the last “cloud first” decade, this decade it is about adding control with cloud economics, efficiency and sustainability.
These value pillars are driving IT investment decisions for the C-Suite across industry sectors and countries today. In fact, based on a recently conducted IDC survey, “value for money” was the highest rated attribute for selecting a cloud technology vendor partner.
The proactive focus on cloud costs over the last 18-24 months is so dramatic that in some cases, it is superseding cloud security focus. At a broad cloud-themed roundtable of an exclusive group of C-suite executives hosted by IDC in February, the tech and business leaders spent the majority of the time discussing cloud cost optimization tips and challenges. “Security is paramount for the cloud, but so is cost control and efficiency for us,” said a CIO of a multinational communications company at the roundtable.
According to a recent IDC CIO Quick poll, 6 in every 10 organizations I surveyed admitted to spending more on the cloud than initially budgeted. There is consensus among the C-Suite leaders that cloud is an imperative for innovation and the foundation of digital business platform.
While cloud adoption accelerated, cloud governance and control mechanisms haven’t kept pace. As a result, up to 30% of cloud spend is categorized as “waste” spend that can be optimized.
This perception of cloud waste combined with tighter budgets and efficiency pressures (from the finance and ESG teams) and macroeconomic factors such as inflation and a potential recession are making cloud costs a top-of-mind consideration for organizations.
With cloud (IaaS, PaaS, SaaS, data clouds) accounting for a dominant portion of IT spend, efficient and optimized use of cloud resources is a key priority. But cloud democratises resources and decentralises the purchase decisions. The combination of consumption-based pricing, dynamism of resources and decentralisation of decisions makes cloud cost control harder. Traditional budgeting, planning, forecasting of IT spend don’t lend themselves to this dynamic cloud world.
Rising cloud costs won’t be as much a concern if tech leaders can monitor the spend, manage it, and see the return on investments. This is the premise used by many organizations to adopt FinOps – as a means to optimize cloud spend rather than altogether cut or avoid cloud usage.
FinOps is a framework, culture and mindset that enables organizations to maximize the value of their cloud investments. At the heart of it, FinOps is about accountability, transparency and a culture of optimization.
FinOps is not yet another dashboard but a powerful methodology focused on people and processes—creating a culture change in many companies. Organizations adopting FinOps principles are able to:
- Be more informed and in control of their cloud environment
- Have confidence and insights to better plan and forecast cloud budgets
- Make cloud economics their strength in negotiations internally and externally
- Identifying areas of optimization (decommissioning orphaned resources, rightsizing environment, matching cloud resources to workload needs etc.) resulting in quick savings
- Empowering developers and cloud users with information to take right decisions
- Put cross-functional collaboration at the heart of cloud project
- Encourage discipline and ownership of cloud spending
- Foster a blameless culture through a single source of truth
- Make IT a business enabler, rather than being a cost center by starting with visibility and, over time building mechanisms to dynamically chargeback business units.
Shift left of cost element – rise of DevSecFinOps
Digital mandates brought synergies between business, IT, security, and developers and we are now rapidly entering the era of FinOps resulting in finance dimension included in this synergy leading to a DevSecFinOps methodology.
The new CIO approach is that if security is a Day 0 job, FinOps is a Day 0.5 job and it is time to shift FinOps left
Business value of FinOps:
In the short term, it helps with visibility and easy savings to bring discipline in cloud use. It also makes users more aware of economic aspect of cloud.
In the medium term, FinOps strengthens organizations’ cloud governance capabilities and improve cloud planning, forecasting, and negotiating. It helps teams consider application right-scaling, resource matching and better tagging of cloud resources.
In the long term, it fosters a culture of collaboration and makes all users take responsibility for cloud costs. It also helps IT have metrics and KPIs to contribute positively to the broader sustainability and carbon footprint reduction goals. FinOps maturity includes Unit Economic concepts. It represents a business approach where a P&L containing the cloud-driven revenue compares it to the cloud costs incurred, so the complete picture of return on investment is evident.
Recession Tech Playbook Guidance: How to Excel with FinOps
Focus on the “and”, not the “or” or “but”. FinOps is not an excuse to cut cloud use. Quality, security, speed and costs are all business value pillars and a balance is key for sustainable and consistent IT transformation. Cost is one dimension. Organizations should be aware of trade-offs when making cost optimization decisions, as this is only one objective (albeit one that is an increasingly high priority).
Start small but start soon. Regardless of where organizations are in their cloud journeys, FinOps as a strategy is critical for the cloud success. Businesses can bring cloud cost visibility as close as possible to engineering teams, so these teams can understand how their decisions impact cloud costs and take appropriate measures at the design point. With regards to teams, organizations can start with 1-2 IT members with a passion for optimization or the CCoE embracing FinOps tasks. The company can then look to slowly build FinOps certification and a full-fledged team.
Explore FinOps enabling tech. A triad of automation, observability and optimization tools can help organizations take their cost governance strategies to scale. FinOps is firstly a strategy and a discipline. Once organizations have clear objectives and KPIs, they can evaluate platforms to implement it.
Adhere to industry standards to benchmark and track progress. Exploring the FinOps Foundation maturity model and adopting the three phases of FinOps – Inform-Optimize-Operate will help organizations clearly benchmark themselves in comparison to their peers and track progress. It will also help in identifying the weaknesses and using the same language of the industry.
Don’t lose momentum. Cloud cost governance is not a one-time exercise and overtime as consumption gets granular and innovation continues at breakneck speed, keeping up is key.
Understand that FinOps is a shared responsibility. Explore the cloud partnership to ensure cost optimization of the cloud and cost optimization in the cloud.
Don’t forget to explore the tips and best practices shared by my IDC colleague Rick Villars, Group Vice President, IDC, in this blog: Adopt a FinOps and Cloud Economics Strategy to Minimize the Risks of Cloud.
We at IDC have made FinOps a key part of our cloud research agenda, so watch out for more research insights from us this year to help you put your best, optimized and collaborative foot forward in the cloud this decade!
